Home Prices Reach New Record Highs, Yet 'Signs Of Normalization' Emerge

Residential house prices continued their upward trend, reaching new all-time highs in April 2024, yet the pace of growth has slowed, potentially suggesting early signs of normalization.

The resilience of house prices was broad-based across the country, with all 20 of the largest U.S. metropolitan areas showing positive monthly increases. San Diego led the annual gains with double-digit growth.

April’s House Price Index: Key Highlights

• U.S. house prices rose 0.2% month-over-month in April, up from a revised flat reading in March, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index. This increase fell short of economist expectations of a 0.3% growth, as reported by Econoday.
• House prices rose 6.3% from April 2023 to April 2024, slowing from the 6.7% year-over-year growth recorded in March 2024.
• For the nine census divisions, seasonally adjusted monthly price changes from March 2024 to April 2024 ranged from -0.2% in the West South Central and Middle Atlantic divisions to +1.4% in the East South Central division. The 12-month changes were all positive, ranging from +3.0% in the West South Central division to +8.5% in the New England and Middle Atlantic divisions.

April’s S&P CoreLogic Case-Shiller Index: Key Highlights

• The 20-city S&P CoreLogic Case-Shiller U.S. National Home Price Index reported a 7.2% seasonally unadjusted annual gain for April, down from a 7.4% annual gain in the previous month. This marks the first year-over-year deceleration in U.S. residential real estate prices, though it exceeded forecasts of 7% growth.
• On a month-over-month basis, the 20-city index rose by 1.4%, slightly decelerating from March’s 1.6% increase.
• San Diego continued to report the highest annual gain among the 20 cities in April, with a 10.3% increase, followed by New York and Chicago, with increases of 9.4% and 8.7%, respectively. Portland recorded the smallest year-over-year growth, with a 1.7% annual increase in April.

Economist Takes

"For the second consecutive month, we've seen our National Index jump at least 1% over its previous all-time high," Brian D. Luke, head of commodities, real & digital assets at S&P Dow Jones indices, said.

Luke stated that 2024 was closely mirroring the strong start observed in the previous year. He mentioned that March and April had posted the largest rise, before a slowdown occurred in the summer and fall.

“Heading into summer, the market is at an all-time high, once again testing its resilience against the historically more active time of the year,” he added.

Luke also highlighted that 13 markets were currently at all-time highs, with San Diego leading once again, topping annual returns for the last six months.

A more cautious outlook came from Dr. Anju Vajja, deputy director for FHFA's Division of Research and Statistics, who noted that despite the rise in April, the appreciation rate slowed amid a slight rise in both mortgage rates and housing inventory.

“The housing market in general began to show some signs of normalization,” she added.

Market Reactions

The housing data released Tuesday failed to trigger a positive reaction on real estate stocks, as hawkish Fed remarks pushed Treasury yields slightly higher.

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The Real Estate Select Sector SPDR Fund XLRE was 0.9% lower at 09:05 a.m. in New York, eyeing its worst session in nearly a month.

Both the Vanguard Real Estate ETF VNQ and the iShares Residential and Multisector Real Estate ETF REZ similarly fell 0.8%.

The VanEck Mortgage REIT Income ETF MORT showed more contained losses, down 0.3%.

SBA Communications Corporation SBAC and Weyerhaeuser Company WY were the laggards within the XLRE ETF, both down 1.7%.

The 30-year Treasury yield, a key benchmark for mortgage rates, rose by 2 basis points to 4.38%, sending the iShares 20+ Year Treasury Bond ETF TLT down by 0.2%.

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Image generated using artificial intelligence via Midjourney.